John Clarke of Gfinity discusses their trading update and reiterates pathway to profitability in 2023

John Clarke CEO of Gfinity #GFIN discusses their trading update and reiterate pathway to profitability in 2023 as adjusted operating loss reduced 52% to £0.4m whilst their core business GDM Increased annualised revenue per user by 270% since it’s launch.

H1 performance

Through the first half of the financial year, the Company has continued to implement its strategic focus on 'what it owns', in particular its fast growing owned audience in the Gfinity Digital Media (GDM) segment of the business.

Gfinity expects to report an adjusted operating loss of £0.4m (H1 FY21: £0.9m loss). This represents a 52 per cent. year on year improvement, building on a 71 per cent. improvement in the prior year, as the business continues on its path towards profitability.

Revenue for the period is expected to be £3.3m (H1 FY21: £3.0m), representing an improvement of 8% year on year.  This figure has been impacted by the decision to consolidate the V10 R League, Gfinity's jointly owned digital motorsport property in conjunction with Abu Dhabi Motorsports Management, into a single season taking place in the latter part of the financial year.  If revenues relating to this were eliminated from the comparative period, the year on year revenue increase would be 24%.

Gfinity Digital Media:

GDM revenues in H1 were £1.6m (H1 FY21: £1.0m), a 62 per cent. improvement year on year. This is a result of: 

·    Increased annualised revenue per user of 23.3p, which represents 31 per cent. YoY improvement and a 270 per cent. improvement on the rate at the launch of the GDM in May 2020; and

·    A rise in Average Monthly Active Users to 13.9m, which represents a 23 per cent. YoY increase.

These figures benefit from the successful integration of the Stock Informer business into the broader GDM network. Stock Informer delivered revenue of £0.4m in the period between acquisition completion on 13 September 2021 and 31 December 2021. 

GDM revenue delivered a gross profit of £1.0m, a 43% year on year improvement (H1 FY21: £0.7m).

During the period, there was also significant work undertaken to continue to optimise site infrastructure and performance, utilising the Company's proprietary Manifold content management system (CMS). 

As a result, contrary to trends seen in previous year, Gfinity has been able to sustain its strong user numbers into the second half of its financial year. Monthly active users across GDM platforms exceeded 15m in January 2022 (January 2021: 11.3m) and rose again to over 16m in February (February 2021: 9.9m). This was a record month for GDM, despite it being the shortest month of the year in a traditionally quiet period. Including related social channels, this means Gfinity is now connecting with over 100m gamers each month.

Technology and Esports Solutions:

Revenues from licensing of Gfinity's proprietary esports technology and delivery of esports solutions for clients remained flat year on year at £1.6m.  Within this segment, Gfinity continued to be the delivery partner for the F1 Esports Series, which broke viewership and engagement records in 2021, achieving over 23 million views across digital platforms, a 103 per cent. year on year increase.

The key strategic focus in this division has been the productisation of Gfinity's technology platform, so that it can be integrated directly into publisher's games and media owners' websites and licensed under a SaaS model. This is achieved without the need for extensive integration each time it is deployed.  

During the period, the platform was utilised in this way to deliver in-app the competitive programme for three of the largest mobile game titles, which featured more than 50,000 participants around the world.  This represented an important proof of concept for the platform, which was also deployed for the fourth year to run the qualification for the ePremier League programme.

The beta version of this updated product will be launched in the second quarter of 2022. The Company expects this to create a significant new revenue stream in the future.

Co-Owned Esports Properties:

As set out above, following the decision to consolidate the V10 R League programme into a single season, in the second half of the year, there was no revenue from this segment in H1 (H1 FY21: £0.4m).  

Consolidation of the two seasons into one will allow for the creation of a live finals event taking place in Abu Dhabi, which is seen as an important step to unlocking sponsorship revenue from the region.

Operating Expenditure:

The growth in the period has been achieved with a reduction in operating expenditure of £0.2m to £2.2m (H1 FY21: £2.4m).

Full year outlook

Notwithstanding the strong progress made during H1 in the areas of greatest strategic value, the Directors now expect full year revenue to be below market expectations.  This is influenced by a number of factors including:

-    A slower than anticipated return to live esports events, which while not the long-term strategic focus of the business, still has an impact on short term revenue and profits

-    Ongoing discussions around a material partnership in the betting sector, which the Directors still expect to complete, but which is now unlikely to deliver the impact on FY22 revenues that originally been anticipated

The Directors do not believe the long-term prospects or future pathway to profitability in 2023 and beyond have changed.